Lloyd's Maritime and Commercial Law Quarterly
THIRD PARTY RIGHTS ON INSURANCE CONTRACTS
Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd.1
The doctrine of privity of contract, in the strict form in which it is applied in England and in common law jurisdictions which use English cases, is arguably a major bar to development of the law. Some of its worst effects have long been alleviated in particular contexts by statute; various devices (e.g. implied contracts) have been employed to circumvent it; in some jurisdictions (Western Australia, Queensland, New Zealand) statutes have sought, though in a fairly limited way, to attack the doctrine itself; and there are from time to time judicial dicta that if no one else will act, the courts may have to do so. In this context, therefore, what is said in this recent decision of the Court of Appeal of New South Wales is certainly of general interest.
The facts were that Trident had in 1977 issued a contract works public liability policy to Blue Circle Cement Ltd. which extended to cover subsidiaries and subcontractors. A schedule described the assured as “Blue Circle Southern Cement Ltd., all its subsidiary associated and related Companies, all Contractors and Subcontractors and/or Suppliers.” McNiece Bros. Pty. Ltd. was engaged in 1978 and started work in 1979 as the chief contractor at the contract site. A labourer who was employed by a contractor supplying labour to McNiece was injured in 1979. He sued McNiece and obtained damages. McNiece subsequently sued Trident for indemnity under the policy.
Before Yeldham, J., McNiece succeeded on the basis of agency reasoning. McNiece, though unidentified and indeed not engaged at the time, was one of the parties on whose behalf the policy was taken out, and could ratify it. But the Court of Appeal was unwilling to accept that a party who was not ascertainable at the date of a contract could be a principal to it, and hence found ratification impossible. In any case the court concluded that, although ratification after loss was possible in a contract of insurance other than one of marine insurance (itself a controversial issue), the act alleged as ratification (bringing suit in 1984) was outside a reasonable time to the prejudice of the other party, and hence too late.
However, the court then held there was a trust of the policy in favour of McNiece (whom it regarded as clearly within the term “the assured”). After discussing the development of the rules as to privity, and in particular problems as to consider
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